Chief Justice Earl Warren: Number 204, United States versus Aluminum Company of America et al.

Mr. Solicitor General.

Mr. Archibald Cox: Mr. Chief Justice, may it please the Court.

This case is here on appeal by the United States from a judgment of the District Court in the Northern District of New York or the Western District perhaps, dismissing the complaint in an action under Section 7 of the Sherman Act.

The case is one of unusual importance because of a trend that seems to us to have developed in the metals industries in recent years, for the large basic integrated companies to acquire smaller independent fabricators in an effort to expand into other related and sometimes competitive basis of the industry.

We have a number of cases pending at that time in an effort to arrest the trend, thinking that it violates Section 7.

Here, the acquiring company is the Aluminum Company of America, the giant of the aluminum industry.

The acquired company was Rome Cable Corporation, a strong independent manufacturer of chiefly insulated wire and cable, both aluminum and copper, for use by electric light and power companies in the transmission and distribution of electricity.

The essential facts, the questions being the same as in all in Section 7 cases, the essential facts may be summarized as follows.

Alcoa, as I say, is the giant of the aluminum industry until World War II, of course, it acquired -- it had a monopoly.

After the war, the United States disposed of the aluminum facilities that it had constructed in such a way that Kaiser and Reynolds entered the field as fully integrated producers of aluminum and aluminum products.

Since 1950, three somewhat smaller producers have entered the field but this is still an industry of few concerns with great economic power.

The big three have 90% of the ingot capacity, Alcoa with 38% of the ingot capacity, is almost 50% bigger than any other.

Justice Potter Stewart: What's -- what does that got to do with (Voice Overlap) --

Mr. Archibald Cox: Well, it seems to me that one must envisage this case not simply as the market for conducting but its relation to the overall aluminum industry that you can't forget the industry as a whole.

I would think that was while background, one of the dominating facts and that's just only importance but a very great importance, I think, in the overall picture of the power of the acquiring company.

Justice Potter Stewart: Well, the fact that it owns railroads might be relevant in the event that it purchased another railroad but I don't see under Section 7 why the fact that it owns railroads --

Mr. Archibald Cox: Well, we would submit --

Justice Potter Stewart: -- (Voice Overlap) to do with the electrical conductor field?

Mr. Archibald Cox: -- we would submit that the -- but I'd -- we would submit that the economic power of the acquiring company in closely related fields has a bearing on its power in any particular market and that when while he must appraise the particular --

Justice Potter Stewart: So the --

Mr. Archibald Cox: -- market cannot wholly forget the fact of the background in which the question arises and now, the immediate facts, the decisive facts, of course, have to do with the conductor field.

One of the major end uses of aluminum is in wire and cable for conducting electricity.

It's about 7% of the ingot capacity goes into that area.

Originally, of course, copper was the favorite conductor of electricity.

And for many purposes, copper today has such a marked advantage, technological advantage that aluminum cannot compete with it.

Aluminum, as I will explain later in more detail, has a very marked economic advantage in use for overhead wire and cable, except in coastal areas where the problems of corrosion.

And as a result, aluminum has rapidly displaced copper for overhead use.

Today, nearly 95% of the installations of bare transmission line are of aluminum.

About 80% of the installations of bare distribution line are of aluminum.

As an aluminum -- as an insulated overhead conductor too, aluminum is -- is rapture -- rapidly capturing the field.

In 1950, only about 6.5% of the new installations were made of aluminum.

In 1955, 51% of the insulated overhead installations were of aluminum and in 1959, the line had gone still farther up and it was 77 and a fraction percent.

Alcoa has been the dominant fabricator and seller of both types of aluminum overhead conductor.

Its percentage of the market has declined as a result of the government policy in breaking the monopoly in setting up for Kaiser and Reynolds.

But it is still a fact that in 1958, the year prior to the merger, Alcoa sold 32.5% of the bare aluminum conductor, ranking first, and 11.6% of the insulated aluminum conductor, ranking third.

Taking the two together as a measure in these related lines Alcoa sold 27.8% of all aluminum conductor more than any other company.

Shortly before the merger, Alcoa's officials began to worry about maintaining what they called its number one spot in the aluminum conductor field especially because Kaiser, its chief competitor, had acquired the wire and cable facilities of U.S. Rubber Company, a merger that is also under attack under Section 7.

Alcoa, being heavily in the bare field, lacked a full line of aluminum wire, both bare and insulated and especially the insulated.

And it felt that this weakness interfered with its maintaining or expanding its already very great share of the market.

Alcoa could have obtained a full line of course either by internal expansion, building its own facilities and acquiring the know-how or by a merger.

It preferred a merger as easier, less expensive, quicker and is not merely as obnoxious to other companies in the wire and cable industry.

One of its officials, discussing the feeling of the industry, wrote a memorandum that's rather interesting.

Acquisitions and mergers, he said, have the common denominator of not adding to existing capacity in the industry and everybody in the industry is very conscious of the fact that the entire industry would be much more healthy if each manufacturer were to talk about two -- were to toss about two thirds of its equipment into the Atlantic Ocean.

Rome, the acquired company, had begun business in the 1930s as a fabricator of copper conductor, wire and cable.

It grew gradually and became one of the largest insulators.

Its business was -- became one of the largest companies in the combined fields but its business was very heavily in the insulated field.

Its technical skill, its research facilities, its reputation for know-how and ability in insulation had made it one of the outstanding companies.

As the use of aluminum grew, Rome, naturally, moved into the aluminum field.

It was -- also it remained, I should say, a predominantly a copper fabricator.

The ratio according to a footage of line was about 25% aluminum in -- in dollar volume, the copper was 90% and the aluminum 10% as I recall.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Archibald Cox: Rome, in the bare aluminum field, was a very small percentage, less than 1%.

In terms of the insulated aluminum conductors, Rome was 4.7%.

And as you see in the latter field, the insulated field, what the merger did was bring together the third and eighth ranking companies, giving them 16% of the market.

And if you put this, I shall argue, was appropriate for many purposes.

The bare and insulated fields together, you find that the combined companies have just a tiny bit under 30% of the market.

The Department of Justice attacked the merger as a violation of Section 7 and the case was tried as the size of the record shows in some length.

The evidence covers many aspects of the aluminum business, especially aluminum wire and cable, but our focus is now confined to the sale of overhead aluminum conductors.

The Government's theory then and especially now that we have focused it is that the acquisition may tend substantially lessen competition in that area, overhead aluminum conductor, whether the market be defined as insulated aluminum conductors or simply as all overhead aluminum conductor both wire -- both bare and insulated.

And I shall talk about both in the relation between what my argument progresses.

The District Court ruled against the Government on all point, specifically, it held that neither insulated aluminum conductor nor all aluminum conductor, both bare and insulated, was an appropriate line of commerce for the purposes of Section 7, then the Court went on and held that the Government had failed to show that the merger might substantially lessen competition in either of those areas assuming that to be appropriate lines in commerce.

So our appeal brings here both the threshold questions concerning the line of commerce and also the question of substantial lessening of competition or rather I should say, a tendency substantially lessened competition.

Justice John M. Harlan: There's no Sherman Act question.

Mr. Archibald Cox: There's no Sherman Act question on this case.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Archibald Cox: Oh, yes, before that, before El Paso.

We do, I should say, disagree with a considerable number of the characterizations and conclusions reached by the District Court.

But I think it is fair to say, although perhaps not literally accurate, that the essence of our case here as in El Paso is that on the undisputed facts, it must be held, as a matter of law, that the acquisition violated Section 7.

On the threshold questions, whether insulated aluminum conductor or all aluminum conductor both bare and insulated for overhead use, is a proper line of commerce.

The issue is rather narrowly drawn.

The parties agreed and the District Court held that it was proper to look -- to lump both bare and insulated conductors together as one line of commerce, speaking of both copper and aluminum.

And also, that it is proper to lump together and that also, it is proper to look at the insulated conductors separately.

The real question here, therefore, is whether aluminum and copper conductors must be lumped together in determining whether this acquisition may lessen competition in any line of commerce or whether aluminum, either taking all overhead conductors or taking only the insulated overhead conductor, belongs in one field and copper belongs in another separate field.

Even upon that narrow issue, it seems to me that the facts are essentially undisputed.

Functionally, either copper or aluminum can be used for insulated conductors.

It's also true that most industrial classifications speak of wire and cable companies or conductors or insulated conductors without distinguishing between those made of aluminum and those made of copper.

A number of companies make both.

Utilities use both, although by no means always interchangeably refer often for different purposes, although they can be used interchangeably.

It is technically easy or technologically easy I should say, for a company that is using its equipment to make copper wire and to use it to make aluminum wire.

There is no serious problem in the adjustment.

Those are the facts, of course, upon which the appellees very heavily rely and upon which the District Court rests.

What we emphasize is that in terms of cost for overhead uses, aluminum enjoys such a very marked advantage over copper that the two types of conductors are not competitive in any proper sense of the word.

Purchasers make their choice solely on the basis of cost in this area, no matter of style or quality.

The price of insulated aluminum conductor is only 50% to 65% of the price of equally conductive copper.

Now, the initial shift from using exclusively copper to making some new installations of aluminum does involve collateral expenses because there's certain differences in technique in doing the work, certain different tools are needed and their problems of connecting aluminum to copper.

Justice Potter Stewart: Is that galvanic action between the two?

Mr. Archibald Cox: It says that some kind of galvanic or corrosive action between --

Justice Potter Stewart: Between the two metals.

Mr. Archibald Cox: Between the two metals.

Justice William J. Brennan: Yes.

Mr. Archibald Cox: Although I should say there has recently been a device invented which referred to in some of the testimony that very greatly diminishes that problem at least in the use of what they call "drop cable", it was running off from the street lines for the housing so that aluminum's advantage becomes even greater.

Despite these problems, it's quite clear that aluminum has such cost advantages for overhead use that it is practically pushing copper out of the area.

As I said before, insulated aluminum cable was only 6% of the new installations in 1950, it was about 50%, 51.6% in 1955 and now, it's in excess of 77%.

It just shows that for many, many purposes, there is no useful cost interrelationship.

And of course, the more aluminum that is strung, the less the collateral cost become and the problem of connecting will become and the greater should the aluminum's cost advantage assuming that other things remain equally.

Since the prices of copper and aluminum do not respond to each other and that is exceeded and since aluminum has this great cost advantage, the availability of copper is a functional substitute, can't meaningfully influence the behavior of insulated -- of companies in the insulated aluminum conductor field.

And that is the crux of the matter from an antitrust point of few.

Putting it conversely, buyers of insulated aluminum would find little comfort in the functional substitutability of copper if the result of the increased concentration in the aluminum, insulated aluminum conductor market, where that quality deteriorated or didn't continue to improve or that prices were raised.

We think, therefore, that this great difference resulting from differences in price, the reflected differences in cost justifies treating the two as different markets.

And the lower courts, in other cases cited in our brief, have quite generally recognized that where there is a marked difference in cost or price that even though the two are otherwise interchangeable, that it justifies the finding of -- as a separate market.

I may say that in arguing that aluminum is separate from copper, we do really no more than imply a usage that is been implied by the officials of both Alcoa and Rome and by others in the industry depressed to develop Alcoa in talking about negotiations with Rome, spoke of their importance in Alcoa's further development in the insulated aluminum wire and cable business.

And in another memorandum, he spoke of the number one spot in the aluminum conductor field distinguishing that from becoming a factor in the copper field.

A sales executive at Rome wrote a memorandum expressing some thoughts and observations on the insulated aluminum market and another Alcoa official referring to the effective Kaiser's purchase placing them in severe jeopardy of a proper share of the aluminum cable market.

Rome again expressed within a speech, spoke of the aluminum covered wire business and the vice president of Southwire Company, another company in the area, when he was questioned by Mr. Bergson replied, "Aluminum wasn't fighting with copper.

We, Southwire, were fighting for our position in the aluminum industry."

So there's nothing strange or noble about our distinction.

The -- the other market, which we think is important, is the position of aluminum overhead conductors taken as a whole, whether bare or insulated and I'll deal with that briefly after lunch.

May it please the Court, just before the recess, I've called attention in fact that in addition to arguing that insulated aluminum conductors are an appropriate line of commerce, we also urge that all aluminum conductors for overhead use, both bare and insulated, should be regarded as an appropriate line of commerce.

The chief objection, not the only one, but the chief objection to this, raised in the opinion of the District Court, was that it was not proper to separate aluminum from copper.

And as I have tried to show, it seems to us that that separation is not only proper but for this purpose, necessary and that when that objection falls then the objection to treating all aluminum conductors, both bare and insulated as a line of commerce, falls with it.

The appellees object to our use of figures for aluminum conductors generally, saying that it's a statistical trick.

Of course, there's no trick.

The figures for all aluminum conductors are -- are obviously composite figures and they're obviously figures for products that are not completely interchangeable in their use.

Breaking them down, one finds, as I said before that Alcoa's share of the bare aluminum conductor market was over 32% at the time of acquisition.

Although, Rome was small that in the insulated aluminum conductor market, Alcoa had 11.6% and Rome had 4.7%.

And we think our case is made, submit that it is made, upon those figures but it does seem --

Unknown Speaker: (Inaudible)

Mr. Archibald Cox: This -- that is for bare aluminum conductors.

I'm not sure whether it appears in the -- in the brief.

The -- the figure is 32 point --

Unknown Speaker: (Inaudible)

Mr. Archibald Cox: That's for the two together, Mr. Justice.

Unknown Speaker: (Inaudible)

Mr. Archibald Cox: That's for the two together.

We're talking in a sense about three sets of figures here, insulated aluminum conductors and bare aluminum conductors which are subdivisions and then the two added together, combined.

And the reason we combined them that I don't want to be guilty of any statistical trick, the reason we combined things, which in a sense are oranges and lemons, is that they are both parts of what appellees repeatedly referred to as a full line and they say it's necessary to have a full line that you can't do very well in selling bare aluminum conductor unless you're in a position to offer insulated aluminum conductor.

And they say a stress, if that is one of the reasons for this acquisition.

But now, we say by the same token, their economic power either in the bare field or in the insulated field can best be judged but -- by what they are in both together.

And the best measure we have of both together is these composite figures which credits like you might speak of the fruit or citrus fruit line depends ability to sell oranges and certainly if retails affected by whether each got lemons on the counter.

And to get his overall position, it's a good thing to measure what he has in the two combined.

Just one thing more, I would like to say about this question of -- of the market or line of commerce.

The District Court appears to have been concerned that it could not find all conductors, aluminum or copper to be a line of commerce and also to regard aluminum conductors, either subdivision, as a line of commerce and faced with the feeling that it must be one or the other.

It shows to take the two together.

Now, it seems to us that that is quite inconsistent with the teaching of Brown Shoe and the Philadelphia Bank case and indeed, earlier cases, that the Chief Justice very clearly pointed out in Brown Shoe that whereas for many purposes, one must define the market broadly to include all the reasonably interchangeable substitutes still within that broad market.

There might very well be a number of economically significant submarkets and then he went on to point out that because Section 7 prohibits an acquisition that may substantially lessen competition in any line of commerce that one must locate each of the economically significant submarkets as well as the broad one and that if there was that prohibited effect in one of the economically significant submarkets, then it didn't matter whether in the broader market, there was an effect or not.

And this goes back at least as far as 278 U.S. in Van Camp & Sons against the American Can Company, wherein a passage quoted by Justice Brennan in the Philadelphia Bank case, the Court said the phrase was comprehensive and means that if the forbidden effect or tendency is produced in anyone out of all the various lines of commerce, the words in any line of commerce literally are satisfied.

And that's essentially our position here.

That brings me to the question --

Justice Byron R. White: But before you leave that question, why wasn't the District Court said insulated aluminum was not a separate submarket?

Mr. Archibald Cox: Well, first, because it felt the -- it -- it had to choose that it had to be either the broad all insulated conductor or separate insulated aluminum conductor.

It felt it put to choice which we say it wasn't put to.

It would prefer the broader line.

Justice Byron R. White: So, certainly insulated conductors are part of some market?

Justice Byron R. White: -- and then what did he say -- and what did the District Judge say of insulated aluminum products were a part of what market?

Mr. Archibald Cox: Of insulated conductor.

Justice Byron R. White: Copper and aluminum (Voice Overlap) --

Mr. Archibald Cox: Copper and aluminum combined.

Justice Byron R. White: So, I gather then your case does rest on -- on being able to establish insulated aluminum as a separate submarket.

Mr. Archibald Cox: It depends on our being able to separate aluminum from copper very largely, yes.

Justice Byron R. White: And that if -- if it -- if the District Judge was correct in --- in -- that insulated aluminum was not a submarket, it isn't going to help you any to -- you can't then argue that bare and insulated aluminum is at the market.

Mr. Archibald Cox: It would seem to me that our case was no better on bare and insulated together than it is on insulated alone, I would think so about it.

We do relies, I said before lunch, on this great price difference on the very fact that the aluminum is for overhead use, it's just pushing copper out, 5%, five years later, 50%, four years later, 77%.

And as the president of Southwire said, "We aren't fighting with copper.

We're fighting for our share of the aluminum market."

Justice Byron R. White: But to what extent is insulated aluminum used overhead?

Mr. Archibald Cox: What?

Excuse me.

Justice Byron R. White: But to what extent is insulated aluminum used overhead?

Mr. Archibald Cox: Well, in insulated aluminum, it is used to the extent of 77% of the new installations.

Justice Byron R. White: Okay.

Mr. Archibald Cox: That's what went from 5% base -- I was speaking a moment ago of insulated aluminum.

It went from 5% to 50% in five years to 77% another four years later.

That's -- it's the big one in the insulated overhead.

Justice Tom C. Clark: (Inaudible)

Mr. Archibald Cox: The -- but I -- but I come to that in just -- in just one moment because I do intend to call attention to those figures and I think it'll save a little time to fit them in.

We come here, as I say, to the question whether this acquisition may substantially lessen competition in overhead aluminum conductors.

Our answer is that this is just such an acquisition as Section 7 was directed at.

That this isn't a peripheral matter, the next to a case like the Brown Shoe case, this is the very core of the trend that Section 7 was intended to arrest.

The House Committee Reports in describing the problem, said the outstanding characteristic of the merger movement that Section 7 was intended to arrest has been that of larger corporations buying out small companies rather than small companies getting together so that they could compete more directly with the large ones.

And the Senate Committee explained that the problem was as a larger corporation grows through a series of small acquisitions, its accretions of economic power are individually so minute as to make it difficult to use the Sherman Act against it.

And it proposed Section 7 as a preventative for that evil.

Now, the core of this case is that a very large firm in the number one spot, as its president said in the aluminum conductor field, has enhanced its power of buying -- by buying up one of the rather few substantial independence in a field in which economic power is already heavily concentrated.

It's -- I come to demonstrate those facts and I think it could be done very quickly.

It can hardly begin said that Alcoa, just prior to the merger, was in the number one spot in the aluminum conductor field taking the two together or that its acquisition eliminated a substantial independence.

Now, take first to fill in the details, the simple figure showing the sales of insulated aluminum conductor in the last year prior to the merger, that's on page 20, Mr. Justice Clark, which were the figures that you asked for a moment ago.

You'll note that the top three companies, Kaiser, Anaconda and Alcoa had between them 55.3% of the insulated aluminum conductor with Alcoa being third.

Alcoa acquired the eighth ranking company Rome with 4.7% of the market.

Alcoa's share went up 40% and the share of the big three went up almost 10%, about 9%.

So much for insulated by itself because I suggested before, in view of the importance of a full line as we are told by the appellees, Alcoa's dominant position can hardly be judged by taking insulated alone.

Taking bare aluminum, which is -- would seem to be the nearest thing in a full line, one finds, and these figures are in the record but not in our brief, that Alcoa was first with 32.5% of bare aluminum, Kaiser was second, with 22% and Anaconda third with 15.5%.

Rome share of bare aluminum was less than 1%, it was small in that.

But it's worth nothing that here, the three companies that had 55% of the insulated field are now the top three with 70% of the bare field and that Alcoa is here the first with almost a third of the market itself.

Then bearing in mind, the necessity of getting a composite picture because of the relationship between these two products and the necessity of the full line, we turn to the combined sales of insulated and bare which is set forth on page 19 of the brief.

There you will see, and these perhaps are the most important figures, they say in big three, Alcoa this time in the lead with 27.8%, Kaiser with 23.1% and Anaconda with 15.8% or between the three, 65% of the market and Rome in the combined figures comes in as a substantial firm with 1.3% of the market give when -- so that when Alcoa and Rome are put together, you have 29.1% of the market in the hands of the single company.

I suggest that even there, the cold figures hardly tell the whole story, that the power of Alcoa and the other dominant firms in the conductor field can't be fairly measured just by their shares, statistical share of the conductor field, without regard to the fact that they are the big integrated companies that dominate the whole industry.

And I would agree that whether it's a railroad or a steamship line, it doesn't matter but it's the fact that it's an integrated company.

It would certainly be important to me if I were buying into the aluminum conductor area myself and I should suppose is, therefore, important from a public point of view.

The point is that the added accretion in the aluminum conductor line of commerce for overhead use is an accretion to still larger concentrations that goes through the whole industry.

It is not insignificant, though not very important in this -- that in this area, Alcoa went out and bought the Cupples Manufacturing Company, another fabricator, not of wire but of aluminum sides and doors and things like that, another case under attack under Section 7.

It said here that Alcoa can't be characterized as a leading or dominant firm because her share of these markets and other markets has been declined.

That's unquestionably true.

It's declining, of course, because she's lost her monopoly because Kaiser and Reynolds were set up and she is now finding her place having lost her exclusive position.

But we do submit that the fact that she once had a monopoly that she's now lost, doesn't give her any privilege to try to hold on to as much of the market as she can.

While she's still a dominant firm, it doesn't except her from Section 7, she is surely subject to the same test that Kaiser or any other dominant firm would be having the position that Alcoa now has in the market.

Not only does the present case seem to us to be typical of what Congress was thinking about as described by the Congressional Committees but I submit that it falls well within the previous decisions of this Court.

In the Brown Shoe case, the Court held that for a shoe manufacturer, which was the fourth largest, to -- with about 4% of the market, to acquire a retail chain, it was something like 1.2% of the market, was a violation of Section 7 because of the amount of the market that would be foreclosed by the verdict of merger.

Now, here, looking only to insulated conductors and forgetting all the rest of our case, Alcoa had 11.6% of the market, almost three times the share of Brown and it acquired in a horizontal merger, a competitor with 4.7% of the market more than three times the share that Kinney had had the acquisition in Brown Shoe.

Here is there, the big company is getting bigger by an acquisition, which has the Chief Justice said of that in words equally applicable here, has no countervailing competitive, social or economic advantage.

I can see only two differences between the Brown Shoe case and this one.

The shoe industry was fragmented if you'd recall with a multitude of small manufacturers.

In these markets, there's already a concentration but surely that can't help the appellee.

Indeed, the Court said in the Philadelphia Bank case that if concentration is already great, the importance of preventing even slight increases in concentration and so preserving the possibility of eventually decreasing the concentration is correspondingly greater.

It could also be said well in the Brown Shoe case, there was a merger trend and here perhaps, there is no merger trend.

Our answers are two.

First, we already have the concentration that results from merger and the effect of being in motion toward that point that was made important at Brown Shoe can't be more significant than being already at the point as this case is.

And the second answer which is that whether you call it a merger trend or not, this acquisition was part of a series of acquisitions in the aluminum conductor field and is parallel to -- by acquisitions in the copper field, which, of course, aren't before us.

Our second reason for objecting to the acquisition of an independent -- no, our first reason here for saying that this is governed by Section 7 is that the acquisition of an independent by a vast integrated producer eliminates the competition between the two without any compensating public advantage.

Our second equally important objection is that it's the -- the successful independent fabricator which is the -- we think a vital creative force and energizing creative force in the industry and that its disappearance destroys something very important.

And there's no better example of that kind of company and its importance to an industry than Rome Cable was.

It began in the 1930s with assets of about $2 million.

It grew almost wholly by its own expansion to a $24 million concern shortly before the acquisition.

It was an aggressive competitor though not one that initiated price cuts.

It had a first rate sales organization.

It was one of the four fabricators equipped to roll its own ingot into rod so that it wouldn't be dependent upon the competing integrated companies to buy rod from them also, it wouldn't have to buy ingot.

But the real way that it made its way, its name, its reputation was by its research, technical skill and very substantial innovations, a year prior to the merger that it bought a -- had built a $675,000 research facility carrying on this trend.

I wish I know how to describe adequately how important the position, the existence of those faculties of independent companies are and how much damage it seems to us it will be done if the vast integrated concerns were able to buy up independent like this.

It's not merely that the economy losses the advantage of having the big firm, put forth its own efforts into its own facilities, into developing its own skill.

It's that the independence, who today feel the competitive stimulus, begin to disappear.

There, the fellows who live by their wits, not in any invidious sense, they can't make money on rod, they can't make money on ingot.

They've got to build the best mousetrap in the old fashion sense.

And when one of them is superseded, that quality is very likely to disappear.

That's one of the intangibles which Section 7, as pointed out in the Brown Shoe case, was intended to preserve for the American economy and community.

Now, in their brief, Rome makes a number of -- not Rome, Alcoa makes a number of answers to this.

First, they say well, Rome was essentially a copper insulator.

It was larger in copper than in aluminum but it was a substantial factor in the aluminum field.

It passes my understanding how the elimination of a substantial factor in the aluminum field can be made any better by saying that this company was an independent fabricator of copper too.

I don't know if it makes him much worse on this record, one couldn't say that it does but it certainly doesn't make it any better.

Appellees also argued below and argued in their brief and the District Court found that the elimination of Rome wasn't very important because there was ease of access into the aluminum conductor market.

The Court pointed out that whereas in 1950 that -- well, first point out that Alcoa was the only producer of conductor in 1940 and that there were 12 producers of bare aluminum conductor in 1950.

I add that there are only 12 today.

The simple fact, of course, is that 1940 was the period in which Alcoa was losing its monopoly in which bare aluminum conductor was taking over the transmission field and after that, the opportunities to get in apparently declined, at least the entries came to a halt.

The Court also said that in 1950, there were only -- there were only four producers of insulated conductor and that there were 29 in 1961.

But I suggest that those figures don't give an altogether accurate impression.

In the first place, only 11 of the 29 could claim as much as 1% of the aluminum conductor field.

Second, there was a tremendous shift from insulated copper to insulated aluminum in the early part of the 1950s.

You will also recall, of course, the early 1950s where the period of the Korean War when allocations of rare -- of metals like copper and aluminum were being made and a considerable amount of aluminum was allocated as replacement for copper.

If you look at that stage, new firms searched into the field but those were temporary conditions that ceased to operate.

There's no reason suppose that they will be repeated and what happened was hardly evidence of ease of access as it's shown by the fact that since 1955, only one firm has entered the market for aluminum conductor and four, had dropped out of the market which is --

Justice Arthur J. Goldberg: (Inaudible)

Mr. Archibald Cox: Well, I was going -- I was going on to stress that point, Justice Goldberg.

It seems to me that it is an answer to the argument that is made about these 200 people waiting in the wings.

And I was going to suggest that while they unquestionably are there and while technologically speaking, there is claiming, no trouble and stopping, drawing copper and drawing aluminum that commercially entering the aluminum area is what certainly be very -- one thing very different.

Now, one can't claim that other companies who are making copper would all have just the same troubles as Alcoa.

But I think the very great trouble that Alcoa foresaw is evidence that other companies would face or shall I say, parallel and troubled by their own particular difficulty.

And of course, the reason among others is certainly that what's technologically possible isn't always commercially possible.

I -- and what -- to consider shifting in any quantity from copper to aluminum would require all kinds of difficult decision.

One of them, just to mention one, do you want to give up your established relationship with the copper suppliers and take on the, perhaps, doubtful business of being dependent for your source of supply on the integrated concerns with whom you will be having to compete?

Being in the wings isn't the same as being on stage.

Justice Hugo L. Black: Does the record show or given the idea of how much business has shifted from copper to aluminum?

I'm talking about just the two copper and aluminum (Voice Overlap) --

Mr. Archibald Cox: In the conductor area.

Justice Hugo L. Black: What -- well in any -- all the --

Mr. Archibald Cox: Well, we're concerned with overhead contractor.

Justice Hugo L. Black: Yes.

Mr. Archibald Cox: Yes, it does, Mr. Justice.

The figures are there on the total poundage or footage and the citations are in our brief but one can tell in terms of the relative share of the market.

In 1950, aluminum had 5% of the insulated conductor, in 1955, had 51%, in 1959, it had 77% or 78%.

That's --

Justice Hugo L. Black: Well, suppose it wasn't relevant in this case and is not relevant probably, I shouldn't ask you, has it been a shift of steel and iron business over into the field of aluminum?

Mr. Archibald Cox: Well, I've -- it's not in the record but I think I can say there clearly has in the -- in many line, yes.

And of course, if one reads the record carefully here, there are many suggestions that the Alcoa people saw other more sophisticated constructions of wire than the insulated wire as an opportunity in the future.

And they picked up a small magnet wire company, rewire company in order to get into that avenue which they hadn't been in before whereas here, of course, they had been competitive.

I think, I've already commented adequately on these 200 concerns waiting in the wings.

In the first place, they've all stayed in the wings since 1955.

Alcoa's difficulties in entering the area while -- suggest that they too would have very great difficulties.

There's always a drag on moving from one area into another.

And finally, I suggest that speculation about what copper companies might do to fill the place of Rome in the aluminum field is simply not an adequate answer to the demonstrated increase in concentration and the disappearance of this very important independent concern.

Now, that brings me to our final reason for arguing that this merger and any other acquisition like it, violates Section 7.

Each acquisition by a major integrated firm like Alcoa is very likely to prove a step in the progressive elimination of significant independent firms in an industry resulting in each capture by the giant integrated companies and a progression that can't be stopped unless you stop the individual merger that says violations of Section 7.

Now, the facts here speak very eloquently.

In February 1957, Kaiser, which, of course, had been coming up rapidly as you'll -- and had a large share of its market, acquired the wire and mill division of the United States Rubber Company, that was a division that made insulated conductors and had a good share although not a great share of the market.

Kaiser had sold 18% of the insulated aluminum conductor and U.S. Rubber, 3.5%.

That merger was one of the factors which led to Alcoa's acquiring Rome and Alcoa officially wrote to one of his colleagues.

Kaiser's purchase of U.S. Rubber's wire and cable division only accentuates our position and will in the future, I believe, places in severe jeopardy of a proper share of the aluminum conductor market.

In May 1957, Olin Mathieson, which through our may is an integrated aluminum company, bought Southern Electrical which made 8% of the sales of aluminum conductor.

Olin wasn't previously in the field but this again is part of the trend of the giant fabricated -- giant integrated company to acquire fabricators as outlets.

And another Alcoa executive, commenting on the proposed measure -- merger with Rome said that Kaiser-U.S. Rubber deal and the Olin Mathieson-Southern Electrical combination seemed to be the most industry racking announcements and certainly the most threatening to Alcoa's position.

Rome Cable is by far the best acquisition, in my opinion, that Alcoa could hope to find.

The step would be the answer to the present Kaiser threat to push Alcoa out of first place in the electrical conductor field, then Alcoa acquired Rome nor was that the end of it.

As soon as Alcoa acquired Rome, Reynolds Metals began to get worried.

And in a discussion that their executives had shortly later in January 1959, on the minutes reigned, since Alcoa's acquisition of Rome Cable Company last week, now lives Reynolds as the only major aluminum or copper company without insulating facilities, it's expected that our sale of metal with electrical applications will suffer, if some action is not taken to enlarge our wire and cable product line.

Reynolds apparently didn't have the money at that time to buy someone as the notes show.

But in May 1961, Reynolds bought the wire and cable facilities of Roebling, which had been a company with an excellent reputation in this field.

And after the record closed in this case, Aluminum of Canada acquired an insulating company.

So, as I suggest that one of these steps does in fact lead to another.

That as the Chief Justice said in Brown Shoe, Congress saw the process of concentration as a dynamic force then it sought to assure that the courts and the Federal Trade Commission would have power to break the force at the outset and before it gathered momentum and we brought suits attacking the Kaiser merger as well as this one.

It seems to me that unless one loses sight of the thrust of Section 7 in a mess of technical wrangling over the definition of the market ease of access and other tools that ought to be kept serving to the main purpose, surely, these cases, the Kaiser one, this one that I've mentioned, are typical instances of the mergers prohibited by Section 7.

What Congress was worried about was that the large concerns with these series of acquisitions, as I said at the beginning, about which there can be quite a lot of argument perhaps in the individual instance as here about ease of access and the like, other added competitive effects would not be enough to make out a violation of the Sherman Act and that it passed this law to prevent that kind of accelerated concentration of economic power, not only on economic grounds but also because of the threat to other values in a trend toward concentration.

This acquisition, we submit, of a significant independent by a vast integrated company, without any offsetting on social, economic or competitive values, violates the very core of the policy embodied in Section 7.

Justice Byron R. White: (Inaudible) -- we wrangle about the way of commerce just for a moment, you do accept the findings below that -- that covered aluminum and covered copper cable competition that the District Court held?

Mr. Archibald Cox: No, I don't think that we accept the meaning of competition as the District Judge used it.

I would call this one of the conclusions or characterizations that one must look behind.

I agree that there are some companies Consolidated Edison of New York is one, which are in a position where for them, the cost advantage may for the present be with copper because they have a great many connections to beg to existing copper lines and the connections are short.

So that the connection is -- preponderates over the distance and of course that would affect cost of it.

But for the great bulk of it, we say that the very fact that aluminum has been displacing copper 5%, 50%, 77%, together with the cost differential --

Mr. Archibald Cox: Oh, yes, and the -- on the bare conductor, aluminum now has served 94% or 95%.

That's because not only of the great difference in cost where you have only the metal and not the cost of the insulator to consider, it's also --

Justice Byron R. White: The more insulation you need, while the more competitive copper becomes, isn't that correct?

Mr. Archibald Cox: Well, I don't think it's really the more insulation, but I think it's the --

Justice Byron R. White: The more expensive the insulation is --

Mr. Archibald Cox: Yes.

Justice Byron R. White: -- the more -- the more competitive copper becomes?

Mr. Archibald Cox: Yes, that would be true.

Justice Byron R. White: So there is that point at which these -- these two --

Mr. Archibald Cox: Well, it's very little in overhead wire.

Justice Byron R. White: -- (Voice Overlap) to be in substantial competition it seems to me.

Mr. Archibald Cox: That -- I -- I don't think that the overhead wires, significant amount of it, reached the point of weight where the factor, Your Honor, calls attention to the matters.

Justice Byron R. White: If that's true in the East Coast, why would they ever put them?

Why -- why would any new installation ever put copper in?

Mr. Archibald Cox: The connecting problem makes the difference.

Justice Byron R. White: This (Voice Overlap) --

Mr. Archibald Cox: There are places where the cost is about the same, as I said with Consolidated Edison.

Justice Byron R. White: Well, how about the East Coast where you do --

Mr. Archibald Cox: Well, that's --

Justice Byron R. White: -- have covered for your conductors?

Mr. Archibald Cox: I don't have any broken down figures on the East Coast except to what I've said about Consolidated Edison but even the Consolidated Edison people recognized that once this new device had come out for drop cable, that then the cost advantage of the aluminum were such that all their new installations of drop cable are going to be aluminum.

Chief Justice Earl Warren: Mr. Bergson.

Argument of Herbert A. Bergson

Mr. Herbert A. Bergson: Mr. Chief Justice, may it please the Court.

This acquisition of Rome Cable Company by Alcoa took place in 1959 and was originally attacked by the Government in 10 lines of commerce.

The District Court held that in all 10 lines of commerce, the Government had neither -- either or not established the lines of commerce or had failed to show a probable substantial lessening of competition.

Now, among the lines of commerce that the Government had in the District Court and which they are not urging in this Court, other vertical aspects of this case, they alleged in the District Court that by virtue of this acquisition, competing aluminum suppliers would be foreclosed from supplying Rome as a market for aluminum -- aluminum ingot.

It was also alleged that there would be a diminution of competition and a foreclosure in the furnishing of rod, which is the basic material on which aluminum wire and cable -- aluminum rod to the basis -- basic material from which aluminum wire and cable is drawn.

In these vertical lines of commerce, the District Court held against the Government and the Government has not appealed, so that there is no question in this case now about Alcoa's integration.

This case has now become a case involving wire and cable.

There is no such thing as the foreclosure of manufacturers as there was in the competing manufacturers, as there was in the Brown Shoe case.

This case is horizontal and horizontal only now.

Now, on appeal, the Government has relied on two lines of commerce.

One, insulated aluminum wire and cable, which the District Court found not to be a line of commerce and two, aluminum insulated wire and cable which the District Court also found not to be a line of commerce.

Insulated aluminum wire and cable is a combination of bare aluminum wire and cable, a line of commerce which we admitted in the District Court because there, there was no competition with copper.

Their specialized know-how was required.

Their aluminum had virtually replaced copper in the transmission of electrical energy and there, there was a recognized industry of producers of aluminum bare wire and cable.

The Court found that in that line of commerce, even though we admitted it that there was no adverse effect because in that line of commerce, Alcoa with 32.5% of the market, acquired Rome with three tenths of a percent of the market.

And the Court held that this, in the light of all other economic factors which I will come to later, was too insubstantial as to constitute a substantial lessening of competition.

Now, the Government's second line of commerce here, the insulated or the aluminum wire and cable line of commerce is nothing more, despite what the Solicitor General has said, a numerical trick to add Alcoa's high figures, admittedly high figures, in their aluminum to their relatively low figures in insulated aluminum to come up with a line of commerce that would might bring this case within the test of Philadelphia National Bank because you get to close to 30%.

Justice Byron R. White: Well, Mr. Bergson, do you -- you -- I gather that Solicitor General said that if he didn't make out on just insulated aluminum as a line of commerce that he probably couldn't make out on bare and aluminum -- bare and insulated together, didn't he?

Mr. Herbert A. Bergson: Well, that's -- I think that's quite right, Your Honor, but I think we have -- we have an additional problem because assuming that -- well, if he doesn't make out on -- on insulated because they have an appeal and there is no case and that -- there's -- there's no charge of substantial lessening competition and I think it is true that -- that if he doesn't make out on an insulator, he cannot add the two together.

And he said that this -- this was the -- this was the -- the reason that the District Court didn't lump them together because he said the District Court said, "You can't lump insulated and copper wire and cable with bare aluminum wire and cable."

But the Court did not base it's conclusion on a statement of that kind.

The Court made a finding of fact which said that aluminum conductor wire and cable excludes insulated copper products and therefore, it does not include all wire and cable products for which there is reasonable interchangeability of use or cross-elasticity of demand.

And then he goes on to say, "In addition, the evidence fails to establish that the combination of bare and insulated aluminum wire and cable considered as a whole is generally recognized in the industry as a separate mark -- economic entity or submarket."

Now, the Court's finding was based on the fact that these two products, bare aluminum wire and cable and insulated aluminum wire and cable.

In addition to constituting separate markets are so -- so completely different from one another that it would be impossible to include within the same line of commerce.

And I would like at this time, if -- if I may, just to show the Court what we're talking about here in some of these things.

This is bare aluminum, ACSR.

This is used in the transmission of electrical energy from the generating station to the distribution station.

There is no copper substitute for this.

Insulated copper is not used at all in the transmission of electrical energy -- I mean an insulated aluminum is not used at all in the transmission of electrical energy.

Unknown Speaker: (Inaudible)

Mr. Herbert A. Bergson: Yes, Your Honor.

Now, there is a smaller type of bare aluminum conductor.

This is what they call the transmission of the distribution size of aluminum conductor.

This is the product that Rome make -- made.

Rome did not make this large size at all.

90% of Alcoa's business in aluminum wire and cable was in that size.

Rome's percentage of the market in this size of cable was three tenths of 1%.

There is no -- there's no substitution between this and insulated aluminum because nobody would use insulated aluminum were it could use bare.

Thus --

Unknown Speaker: (Inaudible)

Mr. Herbert A. Bergson: This is used for the distribution from the -- when the -- when the -- the energy is transmitted first from the generator through these heavy lines to so-called distribution stations where the amount of voltages stepped down and it is then distributed to power stations.

Now, where bare can be used in this line?

Insulated is never used because of a cost difference.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Much more.

Justice Arthur J. Goldberg: Now, did the Alcoa make this?

Mr. Herbert A. Bergson: Alcoa made this, yes.

Justice Hugo L. Black: 10%.

Mr. Herbert A. Bergson: 10%.

Justice Hugo L. Black: Of their installation?

Mr. Herbert A. Bergson: 10 -- 10% of their bare.

Now, here are the insulated products that we're talking about.

This is insulated aluminum line wire.

This also is used in the distribution of electrical energy where insulation is required.

Justice Hugo L. Black: But it's the same as bare.

Mr. Herbert A. Bergson: It's exactly this -- no, it -- well, it can be the same as the bare except for the insulation.

Justice Potter Stewart: A smaller diameter though, isn't it?

Mr. Herbert A. Bergson: Yes, Your Honor.

Justice Potter Stewart: Than the bare you showed us?

Mr. Herbert A. Bergson: Yes, Your Honor.

We showed you a -- what they call a four AWG size.

This I -- I've -- this is a -- a one AWG, American Wire Gauge size.

Justice Byron R. White: Where is insulated necessary -- I mean -- and what make insulation necessary in an overhead line?

Justice Byron R. White: Well, I take it then that all you need is insulation and for overhead purposes, there's no difference in the kind of insulation required for the degree.

Mr. Herbert A. Bergson: It all depends what you use it for, Your Honor, if I may come to that just a little bit later.

Justice Byron R. White: Okay.

Mr. Herbert A. Bergson: This is the copper counterpart of the insulated line -- aluminum line wire that I have just shown you.

This is used for exactly the same purpose as the aluminum is used.

Justice Byron R. White: What's the difference of price of those two?

Mr. Herbert A. Bergson: There -- there is a -- a fair difference in price, Your Honor.

I -- I would imagine that one is 35% to 40%.

The copper is 35% to 40% more expensive.

Justice Tom C. Clark: Is there a difference between the two?

Mr. Herbert A. Bergson: None whatsoever, Your Honor.

This piece of aluminum, which is bigger than the copper because aluminum could carry the same amount of electricity, must be two sizes larger than copper because aluminum has only 62% conductivity and copper has 100% conductivity.

Justice Byron R. White: But nevertheless -- nevertheless, it's 35% to 40% -- one piece there is 35% to 40% more expensive.

Mr. Herbert A. Bergson: As you purchase it.

As you purchase the piece of wire.

Justice Byron R. White: Yes, yes.

Mr. Herbert A. Bergson: But there are other factors that go into the determination as to whether he buy it or not.

Justice Byron R. White: Okay.

Justice Hugo L. Black: Suppose one do matter (Inaudible)

Mr. Herbert A. Bergson: The -- the copper is -- is generally lighter than the aluminum because I think, one pound of copper is the equivalent -- one -- three -- three --

Justice Hugo L. Black: (Voice Overlap)

Mr. Herbert A. Bergson: -- pounds of copper to -- to one pound of aluminum.

Aluminum is lighter, yes.

Justice Hugo L. Black: (Inaudible)

Mr. Herbert A. Bergson: Not in these products, Your Honor.

Now, this is aluminum multiplex cable.

This is also used in the transmission of other distribution of electrical energy and it is also used to transmit the power from the line to the house.

This is the copper counterpart.

They perform exactly the same function.

They have equal conductivity.

And again, Your Honor, the copper is more expensive than the aluminum.

Chief Justice Earl Warren: Why -- why is part of that -- of each of those insulated and the other part not insulated?

Mr. Herbert A. Bergson: Well, it doesn't have to be, Your Honor, and they save money by not doing it.

It's the -- the problem is to keep the wires from coming into contact with one another and not in contact with -- with the -- the public as it were.

Chief Justice Earl Warren: I see.

Mr. Herbert A. Bergson: And -- and as long as you insulate two away, all -- all are protected from each other.

Now, these wire and cable products that I had just shown you, the insulated ones, the aluminum was made by Alcoa before the acquisition.

The copper and aluminum were made by Rome prior to the acquisition.

And it's only in the small bare wire or cable that I showed you and the two insulated products that I showed you that there was any overlap in competition between the two.

And this is the area where the 11.6% and the 4.7% that Mr. Cox talked about exist.

Justice Hugo L. Black: Does Alcoa obtain manufacture of the copper?

Mr. Herbert A. Bergson: Alcoa never manufacture the copper.

The Rome continues to --

Justice Hugo L. Black: Rome does.

Mr. Herbert A. Bergson: Rome continues to manufacture.

Chief Justice Earl Warren: (Inaudible)

Mr. Herbert A. Bergson: Oh, yes, they made no change whatsoever.

Now, in addition to these products that I have shown you, Rome made products such as these.

These are power cables and control table -- cables with many conductors insulated within insulated conductors.

They are the most sophisticated types of conductors that are possible to make.

And it was this skill and ability that Alcoa was looking for when it acquired Rome.

The -- the District Court made an explicit finding on this subject and I think it's -- it's where the -- I'm reading to you our finding number 7, where the Court said Alcoa's purpose in acquiring Rome was to acquire the ability to manufacture the more complicated insulated wire and cable products and to diversify its operations.

Rome's manufacture of aluminum products did not induce said acquisition.

What Alcoa was interested in in acquiring Rome was the ability to acquire these insulating skills that Rome had that Alcoa did not have.

And in order to have a full line of products, not in aluminum, but a full line of products, copper, that they could offer their customers.

Now, it is true that as -- as Mr. Cox said that Alcoa was virtually the sole supplier of ACSR and bare aluminum prior to World War II.

During this period, there was practically no demand for insulated aluminum wire and cable products because it was all being furnished in copper.

Alcoa gave some thought to it but it went to existing insulators and suggested to these insulators that they might experiment with aluminum as a conductor instead of copper.

With the advent of the Korean War, however, and copper became short, the demand for aluminum increased.

And when this demand increased, those who were previously making copper insulated products very quickly turned to insulating aluminum.

They made it on the same machinery, they made it with the same personnel, they sold it to the same customers to whom they were selling it before and they sold it with the same sales personnel that they were selling.

As this developed, Alcoa was asked by its customers if they wouldn't supply insulated aluminum wire and cable.

And Alcoa lacked the know-how to do this, even to construct these simple insulated products that they subsequently made.

Alcoa had dealt with Rome and Alcoa turned to Rome and said, "We would like to go into the insulating business, can you give us the know-how and show us how to do it?"

And Rome said, "Well, we got a better idea, why don't you let us insulate for you?"

So a tolling arrangement was worked out whereby Alcoa supplied the wire and Rome supplied the insulation.

In the meantime, while all of this was going on, Alcoa's position in aluminum wire and cable bare declined precipitously.

In 1954, Alcoa's position in ACSR was 48.4%.

In 1956, it was 30%.

Now, as a result of this, Alcoa felt the need to diversify its product and to diversify into copper, who was already making or selling aluminum.

So that they turned to Rome and suggested acquisition to Rome and Rome refused to sell.

Alcoa wasn't interested in Rome's bare aluminum obviously.

It didn't need Rome's capacity for aluminum insulated wire and cable, they already had it.

But what they needed was the copper products and the know-how and the -- and the diversification that the proper -- products would've given.

Now, Rome --

Justice Hugo L. Black: (Inaudible)

Mr. Herbert A. Bergson: Well, I'll just going to say no.

I don't know where Rome stands in the copper picture as a -- from a -- I mean, from a numerical standpoint.

But Rome was essentially a copper producer.

95 -- 90% to 95% the Court found of its production was devoted to copper facilities.

It was highly skilled, as I said, in the -- in these very sophisticated insulating products.

Rome was not an insulator -- an innovator in aluminum.

Rome hadn't done anything in aluminum except make it when the demand came for it in world war -- in the Korean War.

The Government in its brief suggests that Rome was an innovator in aluminum products and they point out that Rome invented the multiplex cable.

Oh, they didn't invent the multiplex cable but they invented the multiplex cable in 1948 in copper.

And then when they started making aluminum, they readily adopted their -- their equipment and their machinery and their personnel and do the making of the same product in aluminum.

Now, when Rome turned Alcoa down, Alcoa was faced with the problem how to go forward in this.

They could've done one of two things.

They could've gone on their own, as the Solicitor General accept -- had suggested, or they could look for another company to acquire.

Well, they looked into doing it alone.

And in order to get the type of insulating material that they wanted, which had no relation to aluminum conductor wire and cable.

The type that they could get for Rome would've cost them $35 to $40 million and as the District Court found would've taken them 5 to 10 years to acquire the know-how and if that -- and even at the end of 10 years, they would be 10 years behind their -- the -- the present insulators.

Now, again, they reached the decision that they would try to acquire another company.

They went and they looked at six other companies, not one of them had any interest in aluminum to speak of at all.

Their sole interest in -- was in the insulating capacity and they were unsuccessful.

They then turned to Rome again and they succeeded in making the deal.

And this is what this lawsuit is about.

Now, the record shows and the Court found that Alcoa was not interested in Rome's aluminum production at all that it was not seeking a captive market for aluminum, that it was not in seeking to increase its capacity for aluminum and that it was not for the purpose of securing a competitive advantage over anyone in aluminum.

And they were not concerned with Rome's competition in aluminum because the record shows that within a two-year period prior to the merger, Alcoa lost five hundredths of 1% of aluminum business to Rome.

And the record also shows that Rome was not a price cutter.

Furthermore, this is a case where not a single competitor was hurt.

The Government brought forward witness after witness from the industry and those witnesses testified that the acquisition had not hurt them.

Some of them testified that they didn't expect that the acquisition would hurt them in the future.

No one testified that he expected that the acquisition would hurt him in the future.

And we brought in 8 of the 10 common customers who bought from both Alcoa and Rome and every one of those 8 testified that the loss of Rome did not hurt them in their purchasing of this -- of these products.

Now, this I think is -- is part of the background of this case that -- that is -- is fairly important when you consider the -- the legal problems that arise as the result of it.

Now, the first question and of course, the -- the threshold question here is the line of commerce question.

Now, what do we have to determine in line of commerce?

We've got to find the area of effective competition.

If the area is defined too broadly, then the -- the law cannot work its force.

If the area is defined too narrowly, the -- the application of the percentages in various factors are unrealistic.

Now, underneath this problem, this Court in Brown Shoe worked out certain indicia for the purpose of testing not only the broad markets but the submarkets.

One of these indicia was industry recognition.

Now, I'm talking about insulated wire and cable products now.

Aluminum and copper together, not aluminum on the one hand and copper on the other hand.

The Court found and the evidence sustained it that the industry right here is the insulating industry and not insulators of copper on the one hand and insulators of aluminum on the other hand, but insulators.

This is how the census characterizes and classifies this industry.

It's the insulating industry, not the copper industry, copper insulating industry or the aluminum industry.

The people in the business themselves consider themselves as insulators.

They don't designate their product as copper line wire or aluminum line wire.

They designate their property as insulated line wire, insulated multiplex cable, whatever it is, with whatever the conductor happens to be.

Now, the next test that the Court referred to in Brown Shoe was unique production facilities.

The record in this case demonstrates to a fairly well that copper and aluminum insulated wire and cable are made on the same machines by the same personnel and that the companies making them can switch readily from copper to aluminum and all they have to do, if they're drawing aluminum and they want to switch to copper, is to wipe out the machine, change the lubricant and they make copper.

The next test was distinct customers, the customers of the utility companies.

The utility companies, the buyers for the utility companies are informed buyers.

You're not dealing with someone coming in off the street.

So you've got the same customer, the same supplier, the same machinery and in addition to that, you have a product that will do exactly the same thing whether it be aluminum or copper because they perform exactly the same function.

Now, the Government concedes all this.

And they say, "It doesn't matter because there is no price sensitivity between aluminum and copper."

So that of the seven Brown Shoe indicia, you forget five of them and you rely solely on price sensitivity.

But this overlooks the supply indicia and the supply substitution problem here.

In order to comprise a market, and I mean a narrow submarket for antitrust purposes, it seems to me, if you make product (a) and there is product (b) and product (b) competes effectively for the same use and are price sensitive, you have -- both of those products must be in the line of commerce.

But in addition to that, it seems to me that in the line of commerce, you also must include capacity, the ability to supply because if you have product (a) and somebody else who makes product (b) can supply product (a) at the drop of a hat, he must be included in that market.

So that when you have this interchangeability of equipment, the same buyers, the same sellers and a product capable of doing the same thing and the ability to switch from the copper to the aluminum, this price sensitivity test gets lost or should get lost when all of the other indicia of the submarket are met.

Now, when I say isn't just our theory because the record in this case is very, very graphic on this point.

One of the Government's witness was asked by me when he first started to make aluminum insulated wire and cable.

And he said when I got -- when I -- when the customer first asked me to.

Another witness in this test -- in this case said, "We don't care what the customer -- what we supply, we are supplying the customer wants.

If he asks us for aluminum, we'll give it to him in aluminum, if he wants it in copper, we'll give it to him in copper, if he wants it in bronze, we'll give it to him in bronze.

We are insulators and we will supply the customer whatever he wants."

But -- now, this also, I think, is buttressed by the fact that in the Korean War situation, when -- when copper became short, the number of producers of aluminum wire and cable went from 4 to 29 practically overnight.

You don't have to go out and -- and -- there wasn't anything that inhibited them from shifting from copper to aluminum.

Now -- so, it seems to me that this supply oriented indicia is, if I -- if I may use that term, definitely compels that the -- in -- that the line of commerce be the insulated line of commerce and that all people capable of insulating be within that line of commerce.

Now, this is happening today.

The record in this case showed that in 1959, the General Electric Company went from practically nothing in 1958 to 1.5% of this insulated aluminum market in 1959.

And that the Circle Company, a subsidiary of -- of Cerro went from 0% to 1% in 1959.

And the capacity for copper, according to the record, is 20 times that the capacity for aluminum and to leave that out of this market and judge this case solely on shares of so-called insulated aluminum conductor market, in my judgment, ignores competitive realities.

Justice Hugo L. Black: You mean (Inaudible)

Mr. Herbert A. Bergson: I beg you pardon, sir?

Justice Hugo L. Black: What is it (Inaudible)

Mr. Herbert A. Bergson: No, no, no, capacity to manufacture.

For example, Rome Cable or General Cable testified that 95% of their capacity was devoted to copper like it really turn that on the aluminum.

There -- there are -- there are 200 other insulators of copper wire and cable in this country, the Court found.

Now, we're not arguing that the Congress is true, we're arguing that Congress is exactly contrary that we, as Alcoa, who could manufacture the more simple insulated products out of aluminum, we could not turn our capacity into this high -- these highly sophisticated copper products but those who make this highly sophisticated proper -- copper products can readily turn their production and the Court so found, I mean, there's a finding of fact to this effect in the -- in the record.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Your Honor, I'm -- I'm -- the -- the record shows that the copper producers and every -- every insulator examine his productive schedules periodically and there's a finding to this effect.

And he makes what he thinks will bring him the most money and there isn't much money in this aluminum wire and cable products right now because the price competition is intense in aluminum wire and cable.

But the Court also found that anytime they wanted to, when the price picture became right, they could immediately switch to making this aluminum wire and cable products.

And this, I think -- and this, of course, is a question of effects but it's certainly is a completely limiting effect on any kind of -- of market power that a manufacturer of aluminum wire and cable insulator is claimed for by the Government it could have.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: What were the inducements?

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Well, in order to go into the -- into the copper field and get into the highly specialized and -- and sophisticated products, such as the power cables and control cables, you need all sorts of know-how, technical skills, test equipment, machinery, none of which Alcoa had and which the Court found that they couldn't obtain in 5 to 10 years.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Right.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: The whole embraces the part but the part doesn't embrace the whole.

But now, even assuming that -- that there may still be some merit left to the Government's position that price should be the only factor in determining whether copper and aluminum should be in the separate line of commerce, this argument has really no validity.

Price -- the price deferential has not eliminated copper from this market, as Mr. Justice White pointed out, and the price of the wire itself is not the determinative factor.

What the utility buyer is interested in is what the ultimate as installed cost of this wire and cable is going to be and the cost of connectors, labor cost, salvage value for copper wire, all enter into this and as the Court found, I think it's finding 27, finding 28, since copper and aluminum products are completely interchangeable from a -- from a performance standpoint, utility companies choose between copper and aluminum insulated or covered overhead products solely on the basis of economics, not price.

The decision requires evaluation of numerous economic factors in addition to the cost of the wire or cable itself.

Now, these factors, when they are taken into account, sometimes result in copper winning and sometimes results in aluminum winning.

And the record shows that utility companies, when they're buying these products, ask for alternate -- alternate quotes and say, "Give us a quote in aluminum and give us a quote in copper," even though they know that the aluminum quote would probably be somewhat lower that the copper quote.

Unknown Speaker: (Inaudible)

Mr. Herbert A. Bergson: I, thus, want to come to that, Your Honor.

The development has been and the record show that up to 1959, copper had -- and aluminum supplanted copper to the extent of 77.2%.

Now, this evidence was deduct --

Justice Potter Stewart: Over -- overhead requirement.

Mr. Herbert A. Bergson: On overhead, yes, in overhead.

This --

Unknown Speaker: (Inaudible)

Mr. Herbert A. Bergson: Insulated overhead.

Justice Potter Stewart: Yes.

Mr. Herbert A. Bergson: Now, the -- the evidence that -- on which this was based was a survey that was taken by a government engineer.

In that survey, the Government engineer asked for what the various usages had been from 1950 to 1955 and to 1959 and then he asked, "What is your prognosis for the future?"

And there was no result of that tabulated.

And on cross-examination, he testified that those reports were not susceptible of projection and that there is nothing in the record to indicate that this trend will increase beyond 1959.

Further than that, there is record to the -- evidence to the contrary because one witness testified that he -- that -- that in his opinion, the balance had been about reached.

Justice Potter Stewart: I'm not sure I understand the 78% figure or whatever it is about that, is that new installations or is that --

Mr. Herbert A. Bergson: That's just new installations, yes.

Justice Potter Stewart: That's new installations, so --

Mr. Herbert A. Bergson: Your Honor --

Justice Potter Stewart: -- during a particular year or during a period?

Mr. Herbert A. Bergson: During -- over the period of years from 1950 to 1959.

Justice Potter Stewart: But each year, is it measured?

Mr. Herbert A. Bergson: Well, they took it in five year planning.

Justice Potter Stewart: I see.

Mr. Herbert A. Bergson: 1950 to 1955, 1955 to 1959.

Justice Potter Stewart: But that's new installation?

Mr. Herbert A. Bergson: That's new installations and the record shows that so far as Rome is concerned, that Rome's production of copper overhead wire and cable was three-quarters of its production of products for overhead -- insulated products for overhead distribution.

And General Cable Company, which is probably the largest wire and cable company in the country, testified also that about the same percentage of their overhead wire and cable was in copper.

And, in terms of dollar value alone, the 22% that remains in the government survey, according to census figures, is over $15 million so that to -- to eliminate copper from this line of commerce in the light of all of these factors, I think is -- it doesn't comport with the economic realities of life and I think the District Court very properly found that insulated aluminum did not constitute a line of commerce.

Now --

Justice Byron R. White: Well, you -- you don't agree with the Solicitor General then that the District Court made it clean what it said about competition.

Is there really is competition between --

Mr. Herbert A. Bergson: Oh, the District Court found --

Justice Byron R. White: -- copper and aluminum?

Mr. Herbert A. Bergson: -- the District Court found, Your Honor, and I was going to -- get to this in the effects part of my argument that there was active, lively, vigorous competition between copper and aluminum insulated products.

Justice Byron R. White: Why is it that -- why is it that copper has maintained itself for underground insulation?

Mr. Herbert A. Bergson: I think the basic reason, Your Honor, is that underground insulations -- installation is -- are basically -- they're insulated and they -- they are big and the extent of insulation so out ways the expense of the conductor that the -- that the product is -- if they be --

Justice Byron R. White: But there's just one way that -- of installation for -- for overhead.

Mr. Herbert A. Bergson: Well, there -- there are various --

Justice Byron R. White: All you need to be is --

Mr. Herbert A. Bergson: There are -- there are various degrees of installation but in -- in the overhead, I don't think the -- the cost to the insulation is enough to carry the day for copper.

Whereas, in -- in underground, the cost of the insulation and the fact that it has to be in conduits and you have to -- therefore, it's smaller and you -- you -- the copper is smaller because you can use smaller sizes of the copper for all tend to favor copper in the underground insulations.

And we don't -- we -- we don't -- we don't contest this position of the Government at all.

But basically, so far as underground insulations are concerned, copper is the -- by far the predominant --

Justice Byron R. White: (Inaudible)

Mr. Herbert A. Bergson: Foot by foot.

Justice Byron R. White: (Inaudible)

Mr. Herbert A. Bergson: On -- on the insulated.

I think that -- well, I -- I don't know.

No, I'm not sure because -- because this is a -- what -- this is a product called self-supporting cable which is used outside and is used for distribution purposes.

Now, this is aluminum and this is copper, they're both used for the same purpose.

The insulation on the aluminum is much greater than the insulation on the copper.

Justice Byron R. White: (Inaudible)

Mr. Herbert A. Bergson: That's right, that's -- that's quite right.

But Alcoa made none of these before the acquisition and the record in this case shows that -- that various companies ask for alternative quotes on copper and aluminum self-supporting cables such as -- such as what I just showed you.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Yes, Your Honor.

Justice Arthur J. Goldberg: (Inaudible)

Mr. Herbert A. Bergson: Oh, yes, Your Honor.

Yes, Your Honor.

Now, the -- I -- I think, I said all that I -- I need to say about the insulated being a separate line of commerce.

The other line of commerce that the Government contends for is aluminum conductor wire and cable and that includes the bare and the insulated.

This, it seems to me, is nothing more than an effort, as I said before, to try to get these percentages within the Philadelphia National Bank percentages because Alcoa was admittedly high in the bare where the Government does not contend that there has been any lessening of competition.

And Alcoa was a poor third in -- in insulated, where the Government concedes that the percentages alone are not enough to establish a violation of -- of Section 7.

Now, so far as effects are concerned, it seems to me that in order to determine effects, there has to be a private searching analysis of market facts except in the -- perhaps in the Philadelphia National Bank situation.

But in the insulated line of commerce, which the Government is talking, and let's assume that the Government prevails on aluminum insulated line of commerce, Alcoa is not, as the Government stated in its question presented, the largest producer of insulated wire and cable.

Alcoa was third and it was a poor third because Kaiser had 26% and Anaconda had 16% and Alcoa had 11%.

They -- they -- when they acquired Rome, added 4% -- 4.7% which gave them a total of 16.3%.

Now, there has been nothing suggested in any writing by this Court or by any of the economists that 16.3% alone is sufficient to be determinative of a substantial lessening of competition.

And in a case such as this -- such as this, concentration ratios, percentages mean nothing because here, there's complete ease of entry as I said before.

There are no cost advantages, no product differentiation, no economies of scale, no uncertainties so far as the new entrant is concerned and no time lag.

And there are significant companies waiting in the wings, as Mr. Cox mentioned.

There are 200 companies, the Court found, capable of doing this and those companies includes such companies as General Electric, Westinghouse, the United States Steel, Phelps-Dodge, Kennecott Wire and Cable Company, Cerro de Pasco, all very, very substantial companies and there is no reason in the world to believe that if market conditions were such, so that if Alcoa with its market position try to dominate, tried to raise prices, ceased being an innovator and laid back that these companies would not come pouring into this industry and completely decentralizing it.

And in addition to that, even after the acquisition, Alcoa's share of this insulated wire and -- aluminum wire and cable market has declined since the acquisition and had 13 -- 16.3% in 1958 and 13% in 1961.

And this increased percentage or decreased percentage in Alcoa went to the non-integrated fabricators because the record shows that the non-integrated fabricators presently in aluminum wire and cable, increased their percentage from 29% of the market to over 33% of the market during the period of 1959 and 1960 -- 1958 to 1961.

They expanded their facilities, some -- some of them doubled their capacity and not one of them claimed that this acquisition had any adverse effect on them.

Now, in addition to these factors that I have just discussed, the Court in Brown Shoe referred to other factors that should be considered in -- in considering a merger case.

One purpose, what was Alcoa's purpose here?

Alcoa's purpose was not to lessen competition, to enhance its power in any so-called line of commerce that the Government is relying on.

Alcoa's purpose was to obtain insulating know-how and to diversify its product line.

The other point that the Court discussed in Brown Shoe was merger trends.

The Court in this case found that there was no significant merger trend.

The merger between Southern Electric and Olin Mathieson was a situation where Southern -- Olin Mathieson not in a wire and cable business at all, acquired a company to get into the wire and cable business, not just aluminum wire and cable business but the whole gamut of wire and cable business.

And the record shows that after they acquired and they lost position.

And -- and Kaiser acquired Bristol not because they needed any support in aluminum wire and cable because they already had 26% of the insulated wire and cable market.

They were interested in the copper, the complicated know-how, so that they could offer a diversification of products and Alcoa did it for the same purpose.

Does this portend a future trend towards merger?

The record shows no.

The Court found that it did not and Alcoa testified when -- when asked as to whether or not it was going to acquire another company in this field, its executive vice president said, "No, we already got what we've wanted.

We've got the know-how and we're not going -- we're not about to buy it twice."

So that there is no purpose here such as there was in Brown Shoe to dry up outlets or to -- to enhance market position in the so-called aluminum wire and cable -- wire and cable product.

The purpose was to be able to serve -- for Alcoa to be able to serve its customers as well as its competitors were able to serve it because its competitors were all able to offer wire and cable products.

Now, just one other thought, the Government in its brief suggests that there should be a simplified test for deciding merger cases.

And therefore, when you -- when you have the -- the largest and it acquires some percentage no matter how small it is if -- if you get up within a certain range, the -- the merger should automatically be unlawful.

And they say that the reason for that is that businessmen need certainty and the Government needs certainty and that they want to avoid long complicated trial.

Well, in the first place, this case was not a long complicated trial.

We tried this case in 15 days and in those 15 days, we discussed 9 -- 10 lines of commerce, not just the two that are here on appeal.

And I think that we were able to develop a record so that a realistic determination can be made as to whether or not this acquisition has any anticompetitive effects and not a situation where you have to rely on mere numbers alone where the numbers we demonstrate -- we -- we suggest are meaningless.

And even -- even if you could use numbers in this case, you still would not have eliminated the question of what constituted the line of commerce because the numbers mean only -- mean something only if you have a well-defined line of commerce.

And here, you have no line of commerce.

You have a dispute as to the line of commerce, so that there would be no opportunity whatsoever for the businessman to apply a simplified test here because how is the businessman going to know how the Government is going to draw the line of commerce and then apply its numbers?

So that I suggest that -- that the only way that a Section 7 case can be treated, a case of this kind and I think this case is -- is somewhat unique, is that you must examine it all in -- in the light of all the facts and I submit that this is what the District Court did and the District Court made well reason, fought for comprehensive findings of fact.

And as a result of those findings of fact, came of the conclusion that this acquisition did not lessen competition and I submit that Your Honors -- ask Your Honors to affirm.

Justice Byron R. White: (Inaudible)

Mr. Herbert A. Bergson: No, no.

Justice Byron R. White: -- insulated copper and aluminium?

Mr. Herbert A. Bergson: No, I don't -- what I want to put into the line of commerce, Your Honor, is those suppliers who are capable of producing the copper wire -- I mean, the -- the aluminum wire and cable products that are used for overhead purposes.

In other words, our -- our position --

Justice Byron R. White: (Inaudible)

Mr. Herbert A. Bergson: We will eliminate the copper but we won't eliminate the manufacturers -- manufacturers of the copper for underground use because we say that they could -- are capable overnight of producing the -- the aluminum wire and cable for -- for overhead use.

In other words, I'm not -- I'm not saying, Your Honor, that -- that you must include within this line of commerce every -- every piece of copper product whichever -- for whatever purpose it's used.

What I'm saying is that, in addition to -- to the -- the product problem, you also have the supply problem and that you have suppliers here who are capable with complete ease of entry, of coming in here and -- and producing the -- the product that -- that the Government claims is in the line of commerce.